DuPont 2009 Annual Report Download - page 68

E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
exceeds the fair value of the long-lived asset. The company’s fair value methodology is based on quoted market prices,
if available. If quoted market prices are not available, an estimate of fair market value is made based on prices of similar
assets or other valuation methodologies including present value techniques. Long-lived assets to be disposed of other
than by sale are classified as held for use until their disposal. Long-lived assets to be disposed by sale are classified as
held for sale and are reported at the lower of carrying amount or fair market value less cost to sell and depreciation is
discontinued.
Research and Development
Research and development costs are expensed as incurred.
Environmental
Accruals for environmental matters are recorded in operating expenses when it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated. Accrued liabilities do not include claims against
third parties and are not discounted.
Costs related to environmental remediation are charged to expense. Other environmental costs are also charged to
expense unless they increase the value of the property or reduce or prevent contamination from future operations, in
which case, they are capitalized.
Asset Retirement Obligations
The company records asset retirement obligations at fair value at the time the liability is incurred. Accretion expense is
recognized as an operating expense using the credit-adjusted risk-free interest rate in effect when the liability was
recognized. The associated asset retirement obligations are capitalized as part of the carrying amount of the long-lived
asset and depreciated over the estimated remaining useful life of the asset, generally for periods ranging from 1 to
20 years.
Litigation
The company accrues for liabilities related to litigation matters when the information available indicates that it is
probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Legal costs such
as outside counsel fees and expenses are charged to expense in the period incurred.
Insurance/Self-Insurance
The company self-insures certain risks where permitted by law or regulation, including workers’ compensation, vehicle
liability and employee related benefits. Liabilities associated with these risks are estimated in part by considering
historical claims experience, demographic factors and other actuarial assumptions. For other risks, the company uses
a combination of insurance and self-insurance, reflecting comprehensive reviews of relevant risks.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.
Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported
amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or
payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences
between the financial and tax bases of the company’s assets and liabilities and are adjusted for changes in tax rates
and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is
more likely than not that a tax benefit will not be realized. Provision has been made for income taxes on unremitted
earnings of subsidiaries and affiliates, except for subsidiaries in which earnings are deemed to be indefinitely invested.
Investment tax credits or grants are accounted for in the period earned (the flow-through method). Interest accrued
related to unrecognized tax benefits is included in miscellaneous income and expenses, net, under other income, net.
Income tax related penalties are included in the provision for income taxes.
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